A recent research report from Cannaccord Genuity showed Samsung and Apple are the only companies making any money from smartphone sales, reports ZDNet. Together the two companies nabbed virtually all of the profits from smartphones in the second quarter, while other major players including Microsoft, LG, Sony, and Lenovo all recorded a loss. The question is why?

Cannaccord Genuity’s data shows that Apple has a 38% profit margin on its average handset, while Samsung has a 17% margin. Virtually all other manufacturers lose money on their handsets. The data suggests this is largely due to two factors: the fact that both companies make high-end smartphones, which they can charge a premium for, and, when it comes to Samsung, the sheer volume of both high-end, mid-tier, and low-end smartphones it sells, which means the volume of their sales reduces the overall manufacturing costs per device. It seems if others want to actually profit by competing in the smartphone space with Apple and Samsung, they’ll need to find a way to get people to pay for premium handsets or scale so much with their lower priced handsets that the cost of manufacturing each unit comes down.MG